The ACT government is fast approaching the ceiling for land-based taxation hikes, a Canberra academic has warned.
UNSW Canberra finance professor Satish Chand has also suggested public health services could be run by Aspen Medical to contain costs.
In an address to the Canberra Business Chamber's ACT budget breakfast on Wednesday, Professor Chand said on the whole Treasurer Andrew Barr's eighth budget got it right.
Professor Chand said economists strongly endorsed the shift to land taxes the ACT embarked on in 2012 because they were simple to administer and more efficient.
The ACT had more power to leverage them than most jurisdictions because the leasehold system gave bureaucrats "unparalleled control over our urban planning, development, land use, and land taxation including the use of lease variation charges", he said.
However the proportion of revenue flowing from land taxes raised a number of questions, he said.
Residential and commercial rates, combined with land tax and lease variation charges now generated roughly $1 billion, over half of the territory's total tax take.
"One [question] is the extent to which we can depend on just on a single source of revenue all around land," Professor Chand said.
"It raises questions of the sustainability of this particular source of revenue and it also raises questions about equity in terms of the past rises in rates and also those for the future."
Professor Chand said "the room to raise revenues further from land taxes ... could be limited at least for two reasons".
"Ratcheting up rates" could impact property prices, with the rising charge eating into expected capital growth, he said.
The increases could also deflect some investment over the border as the ACT had an open economy due to the permeable border with NSW.
On the budget's priorities, Professor Chand said the focus on health and education was justified, however he said there were more efficient ways to deliver some services.
He urged the territory to consider using public-private partnerships to improve health services.
While declining to refer to them by name, he said Canberra company Aspen Medical was running hospitals and health services in some of the most difficult regions in the world but did not have a local presence.
"If these guys can do that in Iraq, in West Africa, then maybe using them in Canberra and a Canberra-based company could help us get better value for money," Professor Chand said.
While the ACT "gets a big tick" on both its quality of schools and access to education, Professor Chand said the relocation of public housing tenants to the far-flung suburbs of Canberra could lead to worse outcomes for low socioeconomic students.
While research has suggested that the ACT's strong NAPLAN results came back to the highly educated, high socioeconomic population, separate data had shown even students from low socio-economic backgrounds did better when attending school in a high socioeconomic area.
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"The one thing I love about the ACT is we mix public housing tenants in each suburb allowing children from poor backgrounds to attend schools which are in good suburbs and that will probably help with social mobility, allowing children to move up the social ladder," Professor Chand said.
"But our recent push on urban renewal may work against that. If we shift our public housing tenant out into suburbia, co-locate them and provide services over there then we could we shortchanging the very children we want to help."
Mr Barr said the fact the ACT voted strongly for Labor at last month's federal election proved Canberrans wanted significant investment in health and education
While he acknowledged the rate rises had created a pinch for some, and "pressing pause [on tax reform] is politically tempting" it would be "economically a very bad decision and would be selling out all of those people who have been factoring in the continued stamp duty cuts".
Mr Barr also said the ACT remained a relatively low-taxing jurisdiction.
At $4126 per person, the tax paid per person was on par with the Australian average.
NSW tax per person was $4501 in the same period, $4428 for Victoria and $4200 for Western Australia.
However the tax per person was lower in Queensland ($3456), South Australia ($3551), Tasmania ($2948) and Northern Territory ($3120).
Mr Barr also said the move to land taxes over duties meant the ACT did not have a huge hole in its budget from lost stamp duty when the property market softened.
NSW and Victoria had to write billions of dollars off their balance sheets due to lower than expected real estate sales.
"We have insulated ourselves," Mr Barr said.
The treasurer also said the rate of land taxes increases would be slower in the next phase of tax reform, starting in two years.
"I appreciate it's not sustainable to continue increases at the levels we had previous, that's why they've been coming down and they will continue to come down into the future," Mr Barr said.
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